Credo Capital

1. Check and collate all of your investments : Be it Insurance, Mutual Fund, shares, bonds, FD, anything. Put it all one folder, use a good spreadsheet or software ( we use Mprofit)  to track all of it in one place. This will not only help you know where you stand but also help you at the right time in filing tax returns. This will take time but will save you lots of pain later. Automation can help you here, if you give same email id across investments it is possible to get one statement for all your MF and equity.

2. Keep investing simple : Investing is about making your money work for you, that is all. 4-5 Mutual Fund schemes via SIP, 1 bank account, 1 term plan and a medical plan that is all one more or less needs. Ensure that there is nominee for all your investments and that you have a will in place. Never buy  investments under “pressure”, be it from relatives or bankers.

3. Never sweat the small stuff : Things change everyday, don’t fret. Talking heads on TV are paid to talk, but no one pays you to listen, so don’t. Always think will this decision matter one year or two from now on? If not, it is small stuff, this will be the key question to ask before you take any decision financial or otherwise.

Finally, in life small improvements like small investments make large gains in future. Start today and declutter your investments and you will thank yourselves 2 years down the line.

Happy weekend,

Don’t compare yourself to others. Compare yourself to yourself two years ago.

— MicroCapClub (@iancassel) April 17, 2015

Who does not want to save taxes? All of us i’m sure.

But, do you know the best way to save tax? I’m sure your reply is PPF, Insurance policies, you have heard this thing called ELSS Funds or Mutual Funds which let you save tax too but you thought they were ‘risky’ and hence did not invest.

I will leave insurance out as i believe insurance is not meant for investments and is for protection. Mixing both is not a great idea ( it is as if expecting your helmet to give you returns ! it is there to protect you and not give you returns!)

That leave us with PPF and ELSS ( I will leave out the other options such as NSC, Sr Citizen scheme etc as they are not that popular)

PPF tenure is 15 years and return is  8.70%, it is doubtless a great investment that gives both tax saving and tax free returns and judging by the many people diligently updating their ppf passbooks in banks regularly, it is very popular too.

This leaves us with the ELSS, the neglected cousin in the Sec 80c family.

Over last 15 years ELSS funds have given around 15% ( the lowest returns among funds completed 15 years is 15.7% and highest is 21%) , let us assume only 15%, after 15 years that 1 lac is Rs. 8.1 Lacs as opposed to PPF return of Rs.3.49 Lacs ( slightly more than this PPF rates in 2000 was 11% but was reduced to 9% next year so it varies).

One can argue that we have chosen one particular time frame ( 2000-2015) where as return could be different for other time sets say 1999-2014 etc. It could be a valid argument but I really doubt if ever on any 15 year period one got lower returns than PPF, the oldest ELSS Funds are Canara Robeco and SBI Taxgain both around since 1993 and have given around 15% and 18% p.a returns since 1993.

Going by the returns one would think that people would be queuing up to buy ELSS funds but no, the entire category of ELSS schemes has something like 38k cr totally while PPF is 1.8 Lac cr

The reason for not many investing in ELSS is that they don’t know about it and those who know think it is risky ( it is risky, but one can always invest some amount in ELSS along with PPF, say 30% or 50% of what you put in PFF and forget about it for 15 years)

The best way to get the full benefit of ELSS Funds would be to start a SIP ( Systematic Investment Plans ) and monthly invest in it, do that for 15 years to get both tax breaks and tax free returns as returns from equity funds are tax free too after 1 year.

Before i end with the usual disclaimer of Mutual funds are subject to market risks and past performance may not be repeated in future, please read the scheme documents carefully etc.  do remember that the biggest risk would be the risk of not investing in equity and missing out on the great returns it has and can still provide.

Notes : ELSS funds are locked in for 3 years but to get full benefit of it better invest for 10-15 years time frame, tax rules be it for PPF and ELSS are as of today and may change in future.

Better be a ploughman (worker) on your legs than a gentleman on your knees (seemingly rich but in debt) – Benjamin Franklin

Muthu recently wrote a blog on what is short and long term http://wisewealthadvisors.com/2015/05/24/short-term-and-long-term/

thought i will expand on it a bit.

Short Term : Play now and pay later

Long Term : Think & decide

a hoarding screams

On the trapdoors of capitalism… pic.twitter.com/v6zrjNWEQN

— Sanjay Bakshi (@Sanjay__Bakshi) May 22, 2015

The above hoarding is an example of play now and pay later, in this case EMIs for 24 months.

Now this is clear, if you want to play now, you can as from cars to phones everything is available at zero or low down payment, but do remember, you definitely will have to pay later along with interest.

So, what is long term thinking here: first think. Every financial expense means you are borrowing from yourself in future as you alone have to pay the bills later.  An investor thinks the opposite, invest now to get more later.

After thinking if your decision is to still spend money on buying stuff, please go ahead but only with money you have.If you don’t have the money, you can not afford it so find an alternative till you can afford it.

A reminder here, i’m not all suggesting that investing is denying life’s little pleasures, definitely yes. I’m all for the weekend movie or dinner, the key word here is ‘little pleasure’, spending one months income on a gadget is definitely not little, though the EMIs make it look as if it is little, they add up to a lot!.

I’m not against borrowing for purposes of long term benefit, such as a house or education of children. They are basically investments for a good future, the 50 inch TV does not fall under investments even though it may be smart TV, but you would not be smart to buy it on installments. It is downright dumb to have a smart TV but not much saved up for a rainy day.

Pay for it if you can afford, else, look for alternatives. Your life will not improve much by owning too many gadgets, which seem to go out of style every weekend but your bank balance and investments will certainly improve and that to me and i hope also to you is the ‘deal of a lifetime’

Profit from folly, do not participate in it – Warren Buffett.

This simple Calvin and Hobbes cartoon, captures the essence of how consumption benefits investors.

Waste & want that is my motto.